INVESTMENT POLICY STATEMENT

Transcription

1 INVESTMENT POLICY STATEMENT Investment Options Dated : August 2015 Profile Name United Bank of Michigan 900 East Paris Avenue SE Grand Rapids, MI Primary Contact Eric Soya Advisor Devenir Investment Advisors Minneapolis, MN INTRODUCTION The purpose of this Investment Policy Statement (IPS) is to establish a clear understanding as to the investment goals and objectives applicable to an HSA customized investment program. An HSA Investment account is not subject to the requirements of the Employer s Retirement Income Security Act (ERISA). This Investment Policy Statement will: Establish reasonable expectations, objectives and guidelines in the selection of investments. Create the framework for a well-diversified asset mix that can be expected to generate acceptable longterm returns at a level of risk suitable to the program and understanding relative liquidity needs, including: Describe an appropriate risk posture for the investment options. Specify the target asset class policy. Establish investment guidelines regarding the selection of investment managers, permissible securities and diversification of assets. Specify the criteria for evaluating the performance of the programs assets. Define the responsibilities of the Custodian and Advisor. Encourage effective communication among the Custodian, Recordkeeper, Clearing Agent and Advisor. The principal reason for developing a long-term investment policy and for putting it in writing is to enable both parties to protect the investment selection from ad-hoc revisions of sound long-term policy. The written investment policy will help the Custodian maintain a long-term perspective when short-term market movements may be distressing and the Custodian s investment strategy might otherwise be

2 questioned. This IPS is not a contract. Legal counsel has not reviewed this investment policy statement. The Advisor, and the Custodian use it at their own discretion. The IPS is intended to be a summary of an investment philosophy and the procedures that provide guidance for the Custodian and the Advisor. The investment policies described in this IPS should be dynamic. These policies should reflect the Custodian s current status and philosophy regarding the investments available to the HSA Program. These policies will be reviewed and revised periodically to ensure they adequately reflect any changes related to the HSA Portfolio, to the Custodian or to the investment markets. It is understood that there can be no guarantee about the attainment of the goals or investment objectives outlined herein. Plan Objectives: The Custodian is looking to provide an HSA Investment Platform with the following specific objectives: A customizable, cost effective, mutual fund platform using mutual funds to offer a self-directed investment option. Risk Tolerance: Investment theory and historical investment market return data suggest that, over long periods of time, there is a relationship between the level of risk assumed and the level of return that can be expected in an investment program. In general, higher risk (i.e. volatility of return) is associated with higher return. Given this relationship between risk and return, a fundamental step in determining the investment policy for the Portfolio is the determination of an appropriate risk tolerance. There are two primary factors that affect the Investor s risk tolerance: Financial ability to accept risk within the investment program, and: Willingness to accept return volatility Taking these two factors and the inherent purpose of an HSA into account, the Custodian and Advisor determine the acceptable risk levels are as follows: Liquidity: Custodian requires a minimum balance of $2, in the HSA account at the time an HSA Investment Account is opened to cover immediate medical expenditures. Diversification: HSA portfolio investments shall include asset classes covering a range of investment categories to allow for diversification within the specified risk tolerance guidelines. HSA Portfolio funds shall be limited to individual marketable securities or packaged products (i.e., mutual funds or unit investment trusts) in the following categories: Permitted Asset Classes Cash or cash equivalents Fixed Income Domestic Bonds Fixed Income Non-U.S. Bonds

3 Fixed Income Non-Traditional Equities U.S. Equities Non-U.S. Equities Emerging Markets Equities REITs Equity Unit Investment Trusts Mortgage-backed securities Asset Allocation LifeStyle or LifeGoal Permitted Security Types Mutual Funds Stock, Bonds, Money Market Funds Investment Selection, Monitoring and Control Procedures: Investment managers (including mutual funds, money managers) shall be chosen using the following criteria: (Not listed in any order of priority.) Past performance, considered relative to other investments having the same investment objective. Consideration shall be given to both performance rankings over various time frames and consistency of performance. Costs relative to other funds with like objectives and investment styles. Expense ratios and fees comparable to other expense ratios and fees for specific peer group category. Length of time the fund has been in existence and length of time it has been under the direction of the current manager(s). Length of time manager has been managing similar types of funds if manager has been managing a fund for less than 1 year. Whether or not there have been material changes in the manager s organization and personnel. Style consistency: Fund should have no more than 20% of portfolio invested in unrelated asset class securities. The historical volatility and downside risk of each proposed investment. Median to average risk as compared to peer group. 1, 3, 5 and up to 10 year returns evaluated against peer group and correlating index. How well each proposed investment complements other assets in the Portfolio. The current economic environment. The likelihood of future investment success, relative to other opportunities. Reporting Advisor and/or clearing firm shall provide Custodian with an omnibus level report each quarter that lists all assets held by the Custodian on behalf of the resulting participant s omnibus values for each asset and all transactions affecting assets within the Portfolio, including additions and withdrawals. Custodian will share data specific to the employer s plan with any applicable employer group on a quarterly basis. The

4 employer, due to the nature of their business, may require and may designate certain individuals to obtain plan sponsor access to the employer s customized plan for regulatory and compliance monitoring. Custodian shall receive no less frequently than on a quarterly basis and within 30 days from the end of each quarter the following management reports: Portfolio performance results over the last quarter, year, 3 years and 5 years. Performance results of each individual manager for the same periods. Performance results of comparative benchmarks for the same periods. Performance reporting on a basis that is in compliance with industry standards. Meetings and Communication between Custodian and Advisor As a matter of course, Advisor shall keep the Custodian informed of any material changes in the Advisor s outlook, recommended investment policy and tactics. Advisor shall also be available on a reasonable basis for telephone communication when needed. Any material event that affects the ownership of the Advisor firm or the management of the Portfolio must be reported immediately to the Custodian. Duties and Responsibilities: The Advisor Advisor is expected to manage the Portfolio in a manner consistent with this Investment Policy Statement and in accordance with State and Federal law and the Uniform Prudent Investor Act. Advisor is a Registered Investment Advisor and shall act as the investment advisor and fiduciary to the Custodian until the Custodian and Advisor decide otherwise. Advisor shall be responsible for: Designing, recommending and implementing an appropriate asset allocation consistent with the investment objectives, risk profile, guidelines and constraints outlined in this statement. Advising the Custodian about the selection of and the allocation of asset categories. Identifying specific assets and investment managers within each asset category through thorough due diligence process. Provide accessible resources so that the Custodian may provide the HSA participants with a current prospectus, where applicable, for each investment proposed for the HSA Portfolio. Monitoring the performance of all selected assets. Recommending changes to any of the above. Preparing and presenting appropriate reports. Custodian shall be responsible for: The oversight of the HSA Program.

5 Custodian shall read and understand the information contained in the prospectus and each investment in the HSA Portfolio. Custodian shall obtain irrevocable proxies from the HSA Program participants and shall vote proxies according to Custodian s Proxy Voting Policy, to be voted by Devenir. Obtain appropriate and necessary Patriot Act census data from each participating individual. Define the investment objectives and policies of the HSA Program. Direct Advisor to make changes in investment policy and to oversee and to approve or disapprove Advisor recommendations with regard to policy, guidelines, objectives and specific investments in a timely basis. Dated, 2015 By signing below, I acknowledge I have read and understand the terms of the Investment Options Investment Policy Statement. Name Custodian Name Dated: